BANGKOK – Work has resumed on a controversial US$3.5 billion (S$4.4 billion) dam across the Mekong River in Laos, its Thai developer said today, contradicting Laotian assurances it had been suspended following protests over its environmental impact.

Laos agreed in December to suspend the Xayaburi dam project and said on July 13 work had stopped after neighbours’ Cambodia and Vietnam repeatedly expressed concern that the 1,285 megawatt dam would harm migratory fish and the livelihood of downstream villages.

“We are still working on the project. We haven’t received a formal letter from the Lao government that we should suspend or put the project on hold,” Mr Plew Trivisvavet, Chief Executive Officer at Thailand’s Ch Karnchang Pcl, told reporters.

The government of Laos made no immediate comment.

The dam would be the first along the main stream of the Mekong in Southeast Asia. It is at the heart of landlocked Laos’ ambitions to become the hydropower battery of Southeast Asia, with Thailand the main buyer of the energy. Environmentalists fear it could clear the way for more dams across the mighty Mekong, one of Asia’s biggest rivers.

On December 8, the Mekong River Commission, comprising Cambodia, Laos, Thailand and Vietnam, said member governments agreed to approach the Japanese government and other international development partners to further study the dam’s implications before giving Laos the go-ahead to continue construction.

But Ch Karnchang, the dam’s main contractor, expects to begin construction of a reservoir at the site later this year, said Mr Plew. “We have entered the area for some relocation work and to prepare for the construction of the reservoir,” he said.

Communist Laos has hailed Xayaburi as a model for clean, green energy that will stimulate its tiny US$6 billion economy and improve the lives of its 5.9 million people, over a quarter of whom live below the poverty line, many without electricity.

It is the first of 11 dams planned in the lower Mekong that are projected to generate 8 per cent of energy-hungry Southeast Asia’s power by 2025.

Environmentalists say Xayaburi could block the flow of nutrient-rich sediment to southern Vietnam’s rice-growing Mekong Delta. State-controlled media in Vietnam have been uncharacteristically critical of the dam.

According to a study by the Mekong River Commission, an inter-government agency, the proposed 11 dams would turn 55 per cent of the river into reservoirs, resulting in estimated agricultural losses of more than US$500 million a year and cutting the average protein intake of Thai and Lao people by 30 per cent.

China has built four dams on the upper river, closer to its source, but they are equally controversial. Activists say they were responsible for a 2010 drought that sent lower Mekong water levels to their lowest in half a century.

Ch Karnchang’s 50 per cent-owned subsidiary, Xayaburi Power Co, has received a 29-year concession contract from the Laotian government to operate the dam’s power plant.

Other shareholders in Xayaburi Power include Natee Synergy Co, a unit of PTT Pcl, Thailand’s largest energy firm, with a 25 per cent stake. Thailand’s Electricity Generating Co has 12.5 per cent, and Bangkok Expressway Pcl has 7.5 per cent.

Xayaburi Power plans to sell the power to state-run Electricity Generating Authority of Thailand, the country’s sole power distributor, in 2019, Mr Plew said, adding Ch Karnchang planned to book revenue of about 4 billion baht (S$159 million) from the project this year.

Mr Kasem Prunratanamata, head of research at CIMB Securities in Bangkok, said the Xayaburi dam has put pressure on Ch Karnchang’s stock over concerns the environmental impact would lead to delays and raise costs.

Ch Karnchang shares have fallen nine per cent in the last 12 months, underperforming a 13 per cent gain in Bangkok’s broad index. REUTERS